Emmanuel Daniel (ED): I’m very pleased today to be able to speak with Dan Doctoroff, the President of Bloomberg LP (Bloomberg). Thank you very much for speaking with us today. You are in the information business at a time when there’s a lot happening pushing the frontiers of industry. There is, on the one hand, information which is worth nothing because of the Internet; and then there’s the value-add that makes information valuable because of the time in which it’s produced and perhaps the people who use it and so on. What is the next frontier for Bloomberg, given that the data fee business is very much at its frontier today. You’re buying into magazines, you’re looking at traditional media again, what’s the game plan in Bloomberg today?

Dan Doctoroff (DD): We have a very simple four-part strategy, and it’s worth a moment to just talk about it. The core of our strategy is the Bloomberg terminal. We have 300,000 customers at virtually every firm in the financial industry and investment industry. And that is an amalgamation of news, data, analytical tools, communication, and new technologies that enable the trader, the salesperson, the portfolio manager—anyone who has a big stake in the investment world—to access almost anything that they want.

Now it is true that information is becoming more ubiquitous. And that means we have two jobs in order to handle the terminal. The first one is to create unique data delivered to people in the way that they need it delivered, that no one else can offer. And we are constantly creating new sources of information—some home-grown, some aggregated from other places—but formatted in ways that are uniquely useable by our users.

As an example, just the other day we launched our Islamic finance portal in Kuala Lumpur. We’ve taken all the possible information that anyone could want about Islamic finance—the sukuks, the scholars, etc—and put it in one easy-to-use place where it would create a community of people around that information.

The second thing we have to do with the terminal is that we have to make the information easier to find and more usable. We now have 30,000 separate functions on the terminal.

ED: That’s right. I hear people saying that at the CEO level, some CEOs don’t even dare to turn the channels around to search for information…

DD: There’s a lot there.

ED: There’s a lot to learn from Microsoft, maybe.

DD: There’s a lot there. And so 2011 for us is the year of usability and findability. And you’ll see the interface evolve a lot in order to make it easier to use. So that’s strategy number one. Support the core terminal. That is the sun around which all of our planets revolve.

The second strategy is, in view of the financial crisis, almost every financial institution is looking inward saying, “How can we be more efficient?” They’re facing enormous pressure from capital requirements, liquidity rules, they’re facing pressure from shareholders and regulators. Some of their most profitable businesses are not going to be as profitable, if they’re even going to be allowed to exist. So they’re showing lower returns on equity and they need to get that back.

ED: In that second goal of yours, is there an opportunity to link in to the risk management infrastructure?

DD: That’s exactly where I was going. So with that situation where they’re looking inward and recognising they have to be more efficient, they know two things: they know a huge amount of their information flows through Bloomberg every day. The communications between their internal people with their clients, etc, is all passing in many ways through Bloomberg.

The second thing they know is Bloomberg has built up a global infrastructure of networks and data centres and ticker plans that they can potentially take advantage of. So they’re turning to us saying, “What can we do with you, Bloomberg, in order to leverage the investment we already have to operate more efficiently, to see consistent data, to eliminate wasteful processes, and to encourage more straight-through processing…”—all designed to save money.

ED: Okay. And today, post financial crisis—liquidity management, internalising the liquidity information of the marketplace is a very important…

DD: That’s one component. But the big part of it is maximising the efficiency of the information flow.

ED: Okay, that’s the second goal.

DD: So we are designing a whole series of enterprise products that help them to achieve that. The third thing we’re trying to do is, we are really good at taking lots of information from many places, bringing it into Bloomberg, standardising it, cleansing it, building beautiful analytics around it to help our clients understand that data,and then giving them toolsets to display. We’ve never done that outside the investment industry before, we’re now starting to do it in the legal industry, the government industry, and the clean energy and carbon industries. And we think there are many more opportunities.

The final strategy is news. We want to be the most influential provider of business and financial news. Now we don’t do that just to have a hollow title. For us, everything at the company is interrelated. And news for us serves an incredibly important purpose. Our customers, more than anything, want market-moving exclusive content. Our news organisation provides that.

ED: To what extent is all that information juxtaposed to the development of the marketplace post-crisis? I think there’s a desire by regulators to want to see more OTC information come online. And then, in the Asia Pacific region, there’s a lot more depth and increase in the marketplace—not just in the bond market, but commodities and all of that. So, to what extent do you follow the market, or are you creating a realm that is beyond the marketplace?

DD: I think what we do in general is bring transparency to market by providing unique information that gives people more confidence to invest. And by the way, the more confidence people have to invest, the greater the capital flows, and we view that as good for society in general. So I wouldn’t say we lead markets, in fact I think we lubricate markets. We make them more efficient over time.

A case in point again is the Islamic Finance market. Now by having nearly all information you would need to analyse a sukuk, that makes the sukuk easier to trade, easier to understand, and that will enhance the market itself. But it’s the market makers ultimately who are making the market.

ED: And in setting these massive goals, there is a core element from where you continue to make money, and there is a peripheral element where you’re seen as an investor in a way. How long will that investment process last? What is your patience level to see all of it come together and all of the moving parts making money together?

DD: Everything we look at we expect will make money. We are patient. We have the extreme luck of being a private company with one person…

ED: Getting data on your business has been difficult—but go on.

DD: It will always be difficult. I will tell you the sales figures, but beyond that nothing else. But we are very lucky to have one owner who believes in creating value over the long term. And as long as we make the case that the investments we’re making are wise and will pay off with a reasonable-to-very-good return, then we’re going to pursue them. But they all do have to fit together.

And there’s actually two criteria that we ensure we have in place before we undertake any investment beyond the Bloomberg terminal. The first is that the investment or other opportunity has to take from the terminal, in terms of the capabilities we’ve built up over the years to make the terminal successful—the news, the data, the analytical tools, the technology, the relationships, the communication—to create a competitive advantage in that other product or service. And at the same time, just as importantly, everything that we do off the terminal, as we say, has to contribute back in some important way to making the terminal itself stronger. So everything is interrelated. There’s a core to the terminal and a series of planets around that centre core, around that sun, that feed each other.

ED: Let’s just move on very quickly to the other frontier you’re building on, which is the availability and transparency of information in the marketplace post-WikiLeaks—and also post crisis, in a way, because right through the US financial crisis, a lot of what the government was doing was not necessarily transparent, especially in the banking industry: how much money they were putting into which institutions and which institutions were benefitting from taxpayers’ money and what they used it for and all of that information—you, in a way, started making a case for a lot of that to come online.

DD: We not only made the case, we sued the Federal Reserve Bank and won. When they didn’t release the recipients of various forms of aid, we took them to court, and the courts have ruled in our favour. One of our key principles—in fact, in many ways it is a founding principle of Bloomberg—is that we stand for transparency. More information is a social good. It’s a financial good. And we are going to continue to fight for that principle.

ED: What is your sense of what WikiLeaks is doing to the marketplace?

DD: I don’t think it’s had a big effect on the marketplace yet. Certainly there are threats out there that they’re going to reveal secret information from within financial institutions.

ED: What does it do to the discipline of providing information which regulators seem to think is proprietary to themselves? Do you think that governments, regulators, even public institutions would start to look at information differently because of WikiLeaks?

DD: I don’t know the answer to that. I do know, however, that not all information should be public. The relationship between a client and someone serving that client—it’s inappropriate for it to be public. One of issues with WikiLeaks is that the disclosure of information frequently tends to be indiscriminate, and that can have a negative impact.

ED: You also have, in your background, served New York City. It’s the greatest city in the world in some ways, and I enjoy being in New York every time I’m there. What’s the future of New York post-merger of the New York Stock Exchange with the European Stock Exchange? How does that continue to place New York as a global financial centre?

DD: I don’t think it’s the presence of the stock exchange, which is largely electronic today anyway, that defines New York’s future as a financial centre. It’s the hundreds of thousands of people who work in New York, it’s the links that they have with other people around the world, it’s the financial institutions themselves that are creating the products and distributing the products and finding clients.

It’s funny—when I became deputy mayor, one of the first decisions I and Mayor Bloomberg made was to terminate an agreement that the State of New York and the City of New York had already made with the New York Stock Exchange to subsidise them to the tune of $1 billion to build a new lavish headquarters across the street from their existing location. We killed it because we thought that the future of the New York Stock Exchange was not in bricks and mortar. It’s very clear now that that would have been a wasted billion dollars.

New York’s position as a financial centre hasn’t fundamentally changed since the New York Stock Exchange began going electronic, and I don’t expect that’s going to change. What will affect New York’s position as a financial centre is that its market share inevitably is going to go down as global centres in the emerging markets rise with the rise of those markets as financial centres themselves.

ED: Actually, what do you think is driving this desire of the exchanges to merge with each other across huge borders and differences around the world? Is it something to do with the fact that the leaders of some of these exchanges know each other well, or is it a fundamental trend that’s been waiting to happen?

DD: Oh, I think it’s a fundamental trend that’s been driven by the nature of capital markets globally. Essentially what you’ve got going on worldwide is financial markets becoming more complex, becoming more interlocked. You have various asset classes being hedged against each other in new ways. So if you look at the New York Stock Exchange, for example, and Deutsche Börse—the New York Stock Exchange is great in equities, Deutsche Börse is great in derivatives. Those two things relate far more to one another today than they did even a couple of years ago.

It’s all about the globalisation and the increased complexity and interrelationships between asset classes. And those are trends that are not stopping and the exchanges have to respond to them.

ED: So what are some of the natural synergies that you think will be finding each other over the next two to three years between different marketplaces? You’ve got different asset classes, you’ve got the bond market, you’ve got the equities market. South America is very much a…

DD: When we look at our customers, what we see overwhelmingly is a trend toward greater relationships between nearly all asset classes—bonds and equities, convertibles and funds, foreign exchange and equities, foreign exchange and bonds, commodities and equities, derivatives against all of them. That’s what’s really going on and that’s what, in a large part, is driving some of this merger and acquisition activity. And, of course, it’s occurring all across borders.

ED: And just coming back to your role as deputy mayor of New York City at one point, does Bloomberg the organisation and Bloomberg the man stand head to head against the New York of old, the enfranchised owners of New York as it were? The New York Stock Exchange was…

DD: I don’t think there ever was a New York of old. I think that’s a romantic notion that was never true. One of beauties of New York, one of the things I love about New York, is that it is always changing. It’s always evolving. At different times, there are people who are up and people who are down. There are new people coming in to make their mark on the city. You never ever should assume that New York stands still.

ED: And coming back to your business and the complexity that you were describing to me in terms of what you want to achieve, is there always a risk of it unravelling? Unravelling for a number of different reasons—one is the discipline of the marketplace. Data is king today, but tomorrow we don’t know. There’s also the ambitions of Michael Bloomberg himself, and there’s the rumour that he might plug into the business to fund his ambitions in politics, for example.

DD: In terms of Mike Bloomberg, he loves the company, he wants to see it grow, I don’t believe—and he has said very explicitly—that he has further political ambitions. So I don’t see that as a risk at all. He wants to see the company thrive and succeed. In terms of the future of Bloomberg as a data provider, every indication we see is that data is more and more necessary. The world is growing more complex. People need help figuring that out. Our job is to provide them with the information and the tools [they need] to make sense of an increasingly complex world. That’s what we do, and that’s why we have to provide deeper information all the time, and it’s why we have to make that information easier to find. But people need that. And they need to make sure that information is credible. There’s a lot of information out there. We all know that. We’re overloaded with information from sources that we don’t necessarily know or trust. When you’re making decisions, big decisions involving a lot of money, you need to turn to credible sources of information. And that is why we take such great care to make sure our information is credible and trustworthy.

ED: Do you always need to be headquartered in New York? Is that a holy grail that cannot be messed about with?

DD: I think you’ll always see the largest percentage of our employees based in New York, we do the vast bulk of our research and development out of New York. But, geographically, we are diversifying, just like our business is diversifying. Only about 37% of our revenues come out of America today. A somewhat higher percentage of our employees are there, but the percentage of employees, as well as the percentage of our business, in America is declining. It’s still growing in absolute terms, but as a percentage of the worldwide totals, it’s declining, and that simply reflects the growth of the other markets.

ED: Dan Doctoroff, the investment banker; Dan Doctoroff, the public servant; and Dan Doctoroff, the Bloomberg executive—what’s the percentage of you in terms of the roles that you play today? How much of that is public official? How much of that is investment banker? And how much of that is …